Trade, industry & competition minister Parks Tau has vowed to investigate the way board members are nominated for entities that report to his department after a businessman involved in a court battle with the Industrial Development Corp (IDC) over a R70m debt was named to serve on its board.
Sam Bhembe was announced as one of eight appointments to the IDC board on June 26, but his name was hastily withdrawn after the development finance institution flagged the conflict.
The cabinet was forced to issue a correction on the same day his appointment was announced, noting the conflict. He has since become ineligible for selection.
In the cabinet statement last month, Gloria Serobe — cofounder of Wiphold — was announced as new chair of the board, replacing Busi Mabuza. Other recommended board members included:
- former minister Ayanda Dlodlo;
- national security adviser Sydney Mufamadi;
- former premier of KwaZulu-Natal Nomusa Dube-Ncube;
- Reon Barnard;
- Tanya Reeva-Cohen; and
- Keitumetse Mothibeli.
As the country’s premier development finance institution, the IDC grants loans and takes equity in businesses in industrial sectors such as manufacturing, mining, agriculture and green energy.
It generated revenue of R24.3bn in the year ending March 2024, with a net profit of R7.8bn. It disbursed R15.9bn to various entities, mostly black-owned.
It’s unfortunate that you find, post-screening, that these concerns are raised
— Parks Tau, Trade, industry & competition minister
Tau told Business Times after delivering his budget vote last week that he wanted to find out why the Bhembe conflict of interest was not picked up during the screening process.
“I have raised with the director-general my concerns with regards to the screening process because some of the names should not have gone through. I have said to the DG, we need to investigate this because we do subject all the names to a screening, and when names have passed this screening, we are comfortable to take them to cabinet.
“So it’s unfortunate that you find, post-screening, that these concerns are raised,” he said.
A court granted the IDC a default judgment against Bhembe and his business partner Sakhile Masuku in April 2021 over loans of R75m plus interest that they had failed to repay.
The court had initially ordered Bhembe to repay R24m with interest, while Masuku was found to be liable for R32m. The IDC was able to recover over R20m from the companies involved, Aerotropolis Properties and Aerotropolis Medical Science.
When the sheriff of the court sought to attach their assets, the two approached the high court in Johannesburg to have the default judgment rescinded.
Their legal representative argued that the default judgment had been erroneously granted, because it came six months after the IDC issued his clients with a summons to appear in court.
Acting judge AJ Hopkins agreed that this was a long time for the case to lie dormant and the IDC should have given the two notice of its intention to revive the case.
“The giving of notice may be regarded as a tap on the shoulder. The plaintiff effectively signals to the defendant that although nothing has happened for six months, he or she needs to be aware that something is about to happen imminently,” the judge ruled, before rescinding the default judgment and ordering the IDC to pay costs.
Attorney Ebrahim Jooma, who represented the IDC in the case, told Business Times: “The IDC gave loans to both [Aerotropolis] companies and then they couldn’t repay. One went into business rescue, but the IDC did recover some money… around R23m.”
Jooma said Bhembe and Masuku were sued in their capacity as guarantors of the loans. When the default judgment was obtained, a warrant was issued against properties that they owned. He said he could not comment further as he was no longer acting on behalf of the IDC.
Bhembe declined to comment when contacted on Friday.
IDC spokesperson Tshepo Ramodibe said the court ruling in favour of Bhembe and Masuku had been based on “technicalities” and the IDC would continue to press its case.
“The matter is set down for trial on March 9 2026.”
The appointment of unqualified but politically connected board members to state-owned companies has been raised by various commentators since the Zondo commission highlighted the problem.
Although SOEs are governed by the Public Finance Management Act, the appointment and removal of nonexecutive directors is the preserve of the relevant minister to which that entity reports. While individual ministers nominate candidates, the cabinet as a whole approves final appointments.
The Institute of Directors in South Africa (IoDSA) has previously suggested a broad reform of the public sector board appointment process to ensure that boards are staffed by competent, qualified and experienced professionals instead of political appointees.
In a statement reacting to President Cyril Ramaphosa’s state of the nation address in February, IoDSA cautioned that attempts to make the public service more efficient were unlikely to succeed as long as ministers still had the power to make board appointments, which “historically have been done along political lines and patronage”.
“King IV advocates for a competency-based approach to board composition, ensuring that directors collectively have the knowledge, skills, experience and personal qualities necessary for effective governance and oversight,” said IODSA CEO Parmi Natesan.
Natesan said her organisation had over many years advocated for improvements to the nominations process, as well as the professionalisation of board members in the public sector in general, as SOEs play a critical role in the economy and society.
“Professionalising the public sector and enforcing rigorous, competency-based board appointments is a crucial step towards realising the capable and competent state that the president envisions. Without decisive implementation, governance failures will persist, and trust in leadership will continue to erode. It is time for action, not just words.”
The Zondo commission recommended a committee be established to scrutinise nominees of SOE boards and senior management positions to ensure the candidates have the necessary skills and experience. The government promised to set up an independent panel of experts which would play a role in nominating suitable candidates for ministers.
• Additional reporting by Khulekani Magubane
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